This morning, with silver once again holding above the June lows- but with price still 60% of its peak- future catalysts for the price of silver may seem hard to find. Commodity prices are also sharply lower from their 2011 highs, and sentiment for the metals is negative. Most hot money players in the silver market would rather play things from the short side, while searching out any other asset besides the precious metal to ride to new all time highs. It is at times like these that investors have to look at the larger picture and understand that to be successful as an investor, you need to buy the lows (amid the fear) and sell the highs (amid the euphoria.)
Positive news for silver still exists. More data out of India, for example, confirms the idea that silver imports into that country will likely reach all-time highs this year, due to import restrictions on gold. Understand that it literally only takes a fraction of gold demand to be diverted into silver (since the market is nearly 1/100 the size of the gold market) for the price of silver to skyrocket. Then we have more news from another North American mint- this time Canada- showing once again an impressive increase in sales of one ounce silver Maple Leaf coins over last year's numbers. In conjunction with the record setting sales seen by the American mint last month, it looks as though someone understands the need to buy the dip in silver.
But there are other signs that may point to higher silver prices next year. For one, the price of oil- notwithstanding all of the pom-pom waving over shale oil- is quickly marching back towards 100 dollars a barrel. We are closing in on record territory for oil on an annual average basis, by the way- something almost no one whom I read has mentioned. What is good for oil will be good for all commodity futures (even as I remind people repeatedly that silver and gold are more than mere commodities.)
And, finally, near record levels of bulls in the conventional US stock market should be read as a contrarian indicator- meaning that when too many people are on one side of the trade (in this case believing prices are going higher) that the exact opposite move is more likely in the offing. If we finally get some people moving money out of equities and back into the much beaten down and beleaguered precious metals markets, it may further set off a strong short squeeze among all the commodity futures players who have had an easy ride this year shorting metals and going long the DOW.
Time will tell, but I don't believe that negative real rates for savers, quantitative easing, concerns about the status of the US Dollar reserve system, bank bail ins, or any of a number of other bullish fundamentals for higher silver prices have changed. The only thing that has changed is the price.
And Santa is giving you a great holiday discount as we speak.
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